March 22, 2011

Inflation will get worse

Inflation is up, again. Labour spent their entire last year in office using freshly printed money to pay for the bloated public sector that they had created, and when you print money you get inflation. As J M Keynes said when the same thing happened in the 1920s:

"The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."

This new money is starting to leak out into the economy with obvious results. Luckily it is leaking out slowly, had it all gone in one go the UK would have been like Weimar Republic in the 1920s. Labour had a choice, they could have cut their spending but having spent so much time building up the payroll vote they were not going to ditch it just before an election. So they printed money instead knowing that they would probably loose anyway and so it would be for the next government to clean up the mess. They got to use their payroll vote to cushion the blow at the election knowing the problems would land on somebody else's desk, so you can see why Labour was so keen on it

Keeping the public sector bloated was not the only reason that this was such a good move for Labour because inflation helps debtors (like the state) and hurts those that save to help make themselves self reliant, who Labour hate. However back in the 1920s money printing, and the inflation that it brought, destroyed the middle classes who were the rock of stability to the liberal and democratic Weimar Republic leading to a choice between being thrown into a Fascist tyranny or a Socialist one. Again the attractions to Labour are obvious.

There has been a lot of money printing going on so there will be a lot of inflation to come. This is only the start.


Post a Comment

<< Home